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Wendy's Opportunity

The fast food outfit should exploit its move to use healthier cooking oil.

Wendy's(NYSE:WEN) is making headlines today for its planned switch to a healthier cooking oil. The change is already earning the fast food outfit plaudits from public interest groups and health experts alike. But for this effort to pay off in terms of profits, Wendy's will have to turn the move into a competitive advantage. One way to do so might be to put a new spin on an old tactic from its major competitor, McDonald's(NYSE:MCD).

Wendy's indicated today that starting this August, all of its U.S. and Canadian restaurants will begin using non-hydrogenated cooking oil for French fries and chicken entrees. The new oil contains no trans-fats, which are known to raise levels of LDL, or "bad," cholesterol. As a result of the change, trans-fat content in French fries and breaded chicken will be either reduced dramatically -- from as much as 7 grams to 0.5 grams -- or eliminated entirely.

It's a major move, especially considering that Wendy's major competitors, McDonald's and Burger King(NYSE:BKC), have been exploring similar moves for some time but have yet to make a switch. The timing of Wendy's action is also interesting. McDonald's in particular has been on the defensive of late in the wake of Chew On This, a children's version of the book Fast Food Nation, which lambastes the fast food industry. The negative buzz is likely to get worse, since a film version of Fast Food Nation is expected to be released this year.

Wendy's move should allow it to sidestep this negative publicity blitz, but if the fast food outfit hopes to use the new oil to ring up more profits, it will have to market itself more effectively. One way to do so may be to take a page from McDonald's playbook and make its next ad campaign about kids. In Wendy's case, though, rather than advertising directly to children themselves, the focus should be on parents. Parents may not be willing to deny their kids fast food, but given a choice, they are more likely to choose the healthiest option. Wendy's may be adopting the new oil because it is "the right thing to do," but that doesn't mean it shouldn't (and won't) exploit the change to its advantage.